Honda forecasts net profit fall on stronger yen

Japanese auto giant Honda Motor’s humanoid robot Asimo introduces a scale model of the Honda Jet at the company’s showroom in Tokyo yesterday. Honda warned that net profit in the current fiscal year could fall owing to a stronger yen. PHOTO: AFP

Japan’s Honda Motor Co warned yesterday it expected net profit to tumble 18.3 percent in the current fiscal year owing to a stronger yen, a US economic slowdown and higher raw material costs.

The gloomy outlook came as Japan’s second-largest automaker said net profits edged up 1.3 percent in the financial year just ended to a record high — the first rise in the group’s annual earnings in two years.

Japanese automakers have enjoyed brisk profits in the US market, helped by firm demand for fuel-efficient cars and a weak yen. But a US credit crunch and a falling dollar are now weighing on their earnings prospects.

Honda forecast annual net earnings of ¥490 billion (US$4.7 billion) for the year to next March, down from ¥600.04 billion in the financial year which ended last month.

Operating profit is expected to slide 31.8 percent to ¥650 billion, with revenue seen edging up 1.1 percent to ¥12.14 trillion.

Honda said business conditions “remain uncertain because of global political and economic uncertainties, fluctuations in oil and raw material prices, and movements in currency, finance and capital markets.”

“As a result, Honda expects the operating environment to remain difficult,” it said.

For the fiscal year just ended, Honda posted an 11.9 percent increase in operating profit to ¥953.11 billion as revenue rose 8.3 percent to ¥12 trillion.

However, in the fourth quarter to March alone, the automaker’s net earnings plunged 85.6 percent from a year earlier to ¥25.4 billion, hit by higher taxes and raw material costs and a 1 percent drop in revenue to ¥3.06 trillion.

A decision by the Tokyo Regional Taxation Bureau to demand additional taxes cut profit for the last quarter, the automaker said.

The tax bureau said Honda had not been taxed adequately for its Chinese joint ventures over a five-year span that ended in March 2006.

Honda said it believed it had been abiding by law and paid appropriate taxes in China, but no agreement could be reached with the tax authorities.